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Claim No. CFI 053/2022

IN THE DUBAI INTERNATIONAL FINANCIAL CENTRE COURTS

IN THE COURT OF FIRST INSTANCE

BETWEEN

VISION INVESTMENT AND HOLDINGS LIMITED

Claimant

and

MAHDI AMJAD

Defendant

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AMENDED ORDER WITH REASONS OF H. E. DEPUTY CHIEF JUSTICE ALI AL MADHANI

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UPON the Part 7 Claim Form dated 15 August 2022 (the “Claim”)

AND UPON reviewing the Claimant’s Amended Particulars of Claim and the Amended Defence

AND UPON reviewing the UAE Federal Law No. 5 of 1985 (the “Civil Code”)

AND UPON reviewing the UAE Federal Law No. 50 of 2022 (the “Commercial Code”)

AND UPON reading the First Witness statement of Mr Mohammed Raza Mithani dated 30 May 2023

AND UPON reviewing the Defendant’s Application No. CFI-053-2022/1 dated 15 March 2023 seeking an order for Immediate Judgment against the Claimant’s Amended Particulars of Claim and to strike out the entirety of the Claim (the “Defendant’s Application” or “Application” and an order for security for costs (the “Security for Costs Application”)

AND UPON hearing counsel for the Claimant and counsel for the Defendant at a hearing held before me on 5 June 2023 (the “Hearing”)

IT IS HEREBY ORDERED THAT:

1. The Claimant’s claims in respect of the following are struck out:

2. The balance of the Defendant’s Application is dismissed.

3. The Defendant shall pay the claimant’s costs of the Application on the standard basis to be assessed if not agreed.

4. The Defendant’s Security for Costs Application is successful. As such, the Claimant shall pay the amount of USD 100,000 within sixty (60) days from the date of this Order to the DIFC Courts.

5. The Claimant shall pay the Defendant’s costs of the Security for Costs Application on the standard basis to be assessed if not agreed.

Issued by:
Delvin Sumo
Assistant Registrar
Date of issue: 23 November 2023
Date of re-issue: 25 January 2024
At: 11am

SCHEDULE OF REASONS

1. This is the Defendant’s Application for an immediate judgment under Part 24 of the Rules of the DIFC Courts (the “RDC”) dismissing or striking out the Claimant’s Amended Particulars of Claim (the “Application”). The rder for immediate judgment is being sought on the grounds that the Claim has no real prospect of success. Alternatively, the Defendant seeks security for costs on the grounds that the Claimant is balance sheet insolvent thereby unable to satisfy an order for costs made in these proceedings.

2. It is the Defendant’s case that these proceedings are an abuse of process, having been issued by Mr Khaldoun Tabari (“Mr Tabari”) in the name of an insolvent corporate entity (being the Claimant) in order to compel the Defendant to settle a claim, that is rather hopeless, to shield Mr Tabari from any adverse costs orders and with the effect of avoiding any claims by Mr Tabari’s own creditors that could otherwise attach to the proceeds of any judgment in his favour.

3. In response, the Claimant argues that contrary to the Defendant’s assertions, the merits and the validity of its Claim should not be assessed particularly when the Defendant accepted its liability to be a guarantor to a loan agreement that was entered into between Mr Tabari as the lender and Town Square Investment LLC as the barrower (the “Town Square”).

4. Therefore, the issues which give rise to this Application will be fully set out in this Judgment, however I summarise below those matters which are relevant to this Application. I have carefully reviewed all submissions of all parties including oral submissions at the hearing of this Application (the “Hearing”) and if I omit reference to an argument or an authority that had been relied on this does not mean that it has been overlooked or not considered.

5. The underlying dispute to which these proceedings relate arises out of the Claimant’s legal standing and if its Claim against the Defendant ought to fail because the Claimant was not a party to the loan services agreement (the “LSA”) or the amendment loan services agreement (the “ALSA”). The second issue is whether the Defendant had any obligation as a guarantor under the ALSA or whether his liabilities had been discharged as a guarantor at the point when Mr Tabari and Town Square entered into the ALSA. The third issue relates to the claim being time barred under the UAE Transaction Law. The fourth issue relates to the claim being time barred under the UAE Civil or Commercial Transaction Law.

Background to this Application

I will briefly set out the chronological events which are relevant to this Application which are as follows:

6. The Claimant is a corporate DIFC entity, Mr Tabari was its former director. The current shareholders of the Claimant are family relatives of the Mr Tabari. I will be referring to the Vision Investment and Holdings Limited as either (“VIH”) or the (“Claimant”) interchangeably.

7. In or around 2012, Mr Tabari lent AED 30 million to Town Square pursuant to a credit Agreement dated 17 May 2012, the transaction was structured using Investment Bank PSC as an intermediary in order to allow Mr Tabari to charge interest rate on the loan and to avoid the regulations prohibiting unregulated persons from lending money and charging interest.

8. On 12 April 2018, Mr Tabari directly, without Investment Bank, entered into a LSA with Town Square. The Defendant was not a party to this agreement however he signed on behalf of Town Square.

9. On or about 28 June 2018, Mr Tabari entered into the ALSA, which was an amendment to the LSA. The effect and the operation of the ALSA is disputed between the parties, the Defendant contends that the ALSA was effectively drawn up to substitute the obligations in the LSA, while the Claimant argues that the LSA and the ALSA should in effect operate concurrently as the ALSA was not formulated to override the previous agreement. In the LSA, Town Square was requested to directly pay Mr Tabari’s personal bank account, however in the ALSA, Mr Tabari requested that the payments of certain cheques be forwarded to corporate entities reflected in the provisions of the ALSA, one of the payees was VIH, being the Claimant.

Grounds for Immediate Judgment

10. I will chronicle the parties’ submissions in detail to demonstrate the way in which the competing contentions have evolved throughout these proceedings. The Defendant says that the Immediate Judgment Application should be granted on four grounds. The Claimant argues that the Immediate Judgement Application should be dismissed for failure to comply with the requirements set out under RDC 24.7(2).

11. First, the Defendant submits that the Claimant is not a party to the LSA, as such, its Claim falls short of the rules of privity enshrined in UAE Law. In support of this argument, the Defendant relies on Article 129 of the Civil Code which provides that “the essentials for the making of a contract are (a) the two parties to the contract should mutually consent to the basic elements” in addition, the Defendant also relies on the wording of Article 141(1) of the Civil Code which provides that “a contract will not be concluded save upon the agreement of the two parties to the basic elements of the obligation, and the other lawful condition that the parties regard as basic”. Therefore, the Defendant contends that it is implicit a contract creates rights and obligations between the contracting parties, not third parties. Given the fact that the Claimant is not a party to the LSA or the ALSA, it is unclear in what capacity the Claimant is bringing these proceedings.

12. In response, the Claimant argues that the VIH is a beneficiary of the cheque payment in which the Defendant promised to pay but failed to do so, as such it goes without saying that a contract cannot bind a third party to an obligation, but a right to a third party can be granted. The Defendant argues there is no basis for this assertion or authority or any explanation as to why the doctrine of privity does not apply in these circumstances.

13. Second, the Defendant is not a party to either the LSA or the ALSA and at no time agreed to guarantee the obligation of Town Square under either of these agreements. In support of this contention, the Defendant relies on the first paragraph of these agreements which clearly states that they are made between Town Square and Mr Tabari, the Defendant was not a named party, and the signature strip at the end of each agreement clearly indicates that the Defendant was singing on behalf of Town Square, affixing Town Square’s company seal.

14. The Claimant acknowledges that the Defendant was a representative of Town Square, however its role extended beyond that when he accepted to be a guarantor on behalf of Town Square in the LSA. The Claimant rely on the wording found in LSA which states that “in the event of any of the above-mentioned cheques, [the Defendant] shall be the guarantor, personally responsible and undertake to pay the number of bounced cheques within (90) days of their maturity date, where the First Party did not make such payment”.

15. Third, the Defendant submits that it did not have any obligations under the LSA as he was not a party to it. However, even if he had an obligation under the LSA, any such obligation would have been cancelled or extinguished when Mr Tabari and Town Square entered into the Amendment, for two reasons (i) the ALSA operated as a replacement of the obligation under the LSA; and (ii) by virtue of Article 1088 of the Civil Code which provides that any suretyship shall terminate by the cession of the contract or if the oblige discharges his suretyship or the principal obligor from the debt.

16. The Claimant puts forward that the LSA and the ALSA should operate concurrently because the ALSA only amended two provisions, being the details of the property and the outstanding amount owed. As such the operation of the amendment should not exclude the surviving provisions of the original statement because if that was the intention of the parties, they would not have concluded an amendment.

17. Fourth, the Defendant states that the Claim is in any event barred under the Article 1092 of the Civil code “if a debt is due, the creditor must claim for it within six months from the date on which it fell due, otherwise the surety shall be deemed to have been discharged.” Therefore, the Defendant stipulates that as a result of the Claimant’s failure in issuing proceedings within six months from the date that the alleged debt fell due, even if the Defendant had been a guarantor under the ALSA (which is denied by the Defendant) his liability would be discharged by virtue of this provision.

18. In reply to the Defendant’s contention, the Claimant stipulates in its Amended Reply that loans and facilities contracted with banks are considered commercial “their suretyship is a commercial act” as such the limitation period of six months prescribed under Article 1092 does not apply to commercial suretyship. The Claimant goes on further to contend that the Defendant’s reliance on the terms of the credit agreement, which was a commercial transaction, should preclude them from relying on Article 1092, thereby invoking the limitation defence, as their suretyship ought to be construed as commercial due to its direct connection to the credit agreement.

Discussion and analysis

The Governing Law

19. I will deal with the governing law very swiftly. I note that both parties agree that the UAE Law will be the applicable law governing and regulating this dispute, having previously disputed that the DIFC Law was applicable. The Claimant conceded in the First Witness of Mohammed Al Suwaidi dated 17 April 2023, that the UAE Law is the law governing this dispute. The Defendant contends that the Claimant’s complete abandonment of the application of DIFC Law as a governing law was based on the notion that on application of UAE Law to the dispute, their claim would have no real prospect of success, and this is an obvious inference from the fact that it raised its previous argument that DIFC Law is applicable in its reply to the statement of defenc

20. The requirements for immediate judgment under the RDC are prescribed under RDC 24.1 which provides that the:

21. The principles on which the Court acts are well established, and it is sufficient to refer, without setting the passages out, to GFH Capital v Haigh [2014] [CFI-020-2016] [at para 9] endorsed in the Court of Appeal in Saif Saeed Sulaiman Mohammed Al Mazrouie v Bankmed (SAL) [2019] [CA-011] [at para 21]. The Cout must consider whether the claimant has a “realistic” as opposed to “fanciful” prospect of success, meaning one that carries some degree of conviction and is not merely arguable as opposed to one that is entirely without substance; a mini trial and oral evidence should be avoided, and the Court should not attempt to resolve conflicts which are normally resolved by a trial process, although it may be clear that there is not substance in factual assertions in which case immediate judgment may be given; and the Court must take into account not only the evidence before it in the Application, but also the evidence that can reasonably be expected to be available at trial.

22. The applicant for the immediate judgment carries the burden of proof, although if a claimant discharge that burden by adducing evidence which establishes an entitlement to judgment, the defendant carried the burden of adducing evidence to show that it has no real prospect of successfully defending the claim or there is some other reason why the proceedings should go to trial Barclays Bank Plc v Shetty [202] ][CFI-061-2021] at para 102.

23. In the present case, the Defendant adduced evidence of the LSA and the ALSA demonstrating that his liability was discharged when Mr Tabari entered into the ALSA with Town Square in addition that the Claimant does not have a locus standi by virtue of the UAE Transaction Law to bring a claim against the Defendant. The Claimant has the evidential burden of showing that he has a real prospect of success of making out the Claim that he has legal standing to bring these proceedings against the Defendant and the Defendant’s liability is not discharged at the making of the ALSA.

Locus Standi

24. Turning to the pertinent issue to this case and whether the Claimant has a legal standing to these proceedings before this Court. It is interesting to say that remarkably, the Court is dealing with a claim where the relevant parties to the LSA and the ALSA being Town Square and Mr Tabari are not parties to these proceedings.

25. The Claimant’s primary case is based on the notion that considering VIH is a beneficiary of a cheque payment in which Town Square promised to pay under the ALSA and considering that the Defendant was a guarantor under the LSA, “it goes without saying” that although a contract cannot bind a third party to an obligation, however a right to a third party can be granted.

26. As it was established that only parties to a contract could acquire directly enforceable rights or obligations under it, this was the rule of privity, or third-party rule – anyone not “privy” or a party to a contract could not sue or be sued on it. This rule suggest that non-parties are prevented from enforcing contracts made for their benefit. As a nonparty to the LSA and the ALSA, the question is whether the Claimant’s Claim fall within the rules of privity prescribed in the UAE Law, particularly under Article 129 and 141 of the Civil Code which reads:

27. My view is that the Claimant has only one opportunity to succeed on the legal capacity issue by either providing this Court with a legal basis or authority on why the Court should not rely on the doctrine of privity and that it does not apply in the present case.

28. The Claimant contends that the beneficiary of the cheque payments, namely the Defendant, promised to but did not make any payment, by virtue of paragraph 10 of its particulars of claim. The Claimant was consistent in its submission that the cause of action and being a legal before this Court is solely based on the notion that it is entitled to do so in its capacity as a beneficiary and has a conferred right to do so.

29. It is important to note that the Claimant has not previously pleaded their reliance on Article 252 of the Civil Code entitling a beneficiary a right to bring a claim and was only raised at trial. The Defendant took an issue with the Claimant’s late reliance and objected on the premise that they did not.

30. The Claimant then asserted that they are allowed to refer to the law at any stage so long as they give their opponent the chance to deal with it. In my view, in the circumstances it is not too late for the Claimant to substantiate their Claim and refer to an article which could assist their case. I allowed the Claimant to proceed and set out their arguments with respect to Article 252 of the Civil Code. Under Article 252 of the Civil Code which prescribes that a “…Contract does not impose any obligation on third party, but it may establish a right in their favour”.

31. From my reading of Article 252, it appears that the UAE Civil Code recognise an exemption from the “privy” rule in an explicit manner way, one must look at the contract to determine whether the contract have established such right in order to provide them with a standing to bring this case.

32. The relevant part of the LSA and ALSA can be found on the second page of each agreement under the heading:

33. The next paragraph provides:

34. In my judgment the wording of the contract namely the clause headed the obligation of the third party are clear and need no further interpretation to conclude that the parties have intended for the remaining amount of the loan and its interest to be paid to VIH. That can only be a right conferred to VIH which must give them a legal standing to be compensated the outstanding sums available which were promised to be repaid.

35. In the alternative, the lack of any legal standing argument, the Defendant contends that the ALSA does not even purport to confer a benefit (let alone a right) on VIH in respect of the following alleged obligations and sono such obligations can arise:

36. I agree to the Defendant’s contention on the parts of VIH’s claim relating to the above except the claims under paragraph (d) None of the claims under paragraph (a) to (c) have been conferred to the claimant nor in LSA neither in the ALSA and therefore must be struck out. VIH has failed to respond to this point in its evidence and submissions in reply to the Application.

37. As far as the Defendant’s submissions is concerned which involve their argument that the agreements have conferred no more than the sums or the values of the 5 cheques for AED 4,000,000, AED 6,250,000, AED 7,250,000, AED 9,768,928 and AED 435,729 which in total equivalent to AED 27,722,657. I am minded concluding that the wording of the contract is clear when it is conferred to the Claimant more than the value of the 5 cheques. Thus, the total amount of payment indicated above is AED 32,139,009 as remaining balance of loan amount and its interest due in favour of (vision investment and holding limited company). As such, the Defendant’s argument must be rejected.

38. Moving on, the Defendant contends that even if the Court accepts the Claimant’s submissions that it has a joint right to bring the Claim because a right was conferred upon it under the ALSA, it would still be bound to fail for non-compliance with RDC 20.10 which states that: “Where a claimant claims a remedy to which some other person is jointly entitled with him, all persons jointly entitled to the remedy must be parties unless the Court orders otherwise.” I am uncertain by what the Defendant meant by what so called jointly entitled rights in this context. However, I shall take the argument at its highest. The Agreements provided for three deferent sets of right:

39. It is striking to know that the sum AED 4,474,161 which is related to the down payment toward unit 1005 in favour KRT LIMITED is the same amount that add to the total cheques amount in order to reach the sum AED 32,139,009 deferred to the Claimant.

40. My interpretation is that what parties intended is that the First party either repays the loan in the method prescribed under paragraph (a) or (b) or to be paid in full as prescribed under paragraph (c) being in favour of the Claimant.

41. In my judgment, there is no joint right between VIH and KRT and so this argument must fail too. In any event, if the case is to continue against the Defendant only, then the Claimant can only require him to pay the values of the 5 cheques AED 27,722,657 as this is limitation of the Defendant’s liability under the Guarantee clause “personally responsible and undertake to pay the amount of bounced cheques within (90) days of their maturity date, where the First Party did not make such payment.”

42. Finally on this part the Defendant argues that in any event, they cannot be ordered to pay VIH since the Claimant failed to reveal its legal ownership of the company. In my opinion, its an irrelevant argument and it must be dismissed.

The Defendant is not a guarantor

43. As set out above, the Defendant asserts that he cannot be held liable in paying Town Square in his capacity as a guarantor, this argument is based on two-fold.

44. The first limb is that he was not a party to either the LSA or the Amendment and at no time agreed to guarantee the obligations of Town Square under either of these agreements. He refers to the first paragraph of each of these agreements to indicate that he was not named as party to any of the agreements referred to by the Claimant. It follows from that a contract cannot bind a third-party to an obligation.

45. The second limb is that neither the LSA nor the Amendment were signed by him as a legal person, they were signed by Town Square acting through as an authorised signatory. As far as the first limb is concerned, Mr Mahdi full appear in the third Page of LSA in the following form:

46. It is obvious that the name of the Defendant appears in the LSA, however Mr Mahdi has not addressed the Court as to why a party’s name in a contract must only appear in the first paragraph. It is clear that the Defendant has been nominated in a written form in a contract to be a guarantor on behalf of Town Square bounced cheques. I shall move on now to see whether Mr Mahdi had the knowledge that he is in fact a guarantor.

47. It is quite essential to note that none of the parties has submitted any authority from UAE legal system to support his argument in this regard. The signature in any document has more than one purpose and one of these purposes is that it acts as a confirmation of the content of the document. Mr Mahadi has looked at the term of the guarantee then signed the document acknowledging his obligation as a guarantor and makes no reservation whatsoever to protect him from the arrangement. That has one consequence, Mr Mahadi must be bound by the document which he signed. The question whether he signed on personal capacity or as representative of company will not change the fact that he knew and accepted to be a guarantor.

Distinguishment

48. The Defendant then said even if he had an obligation under the LSA, any such obligation would have been cancelled or extinguished when Mr Tabari and Town Square entered into the Amendment, for two reasons (i) the ALSA operated as a replacement of the obligation under the LSA; and (ii) by virtue of Article 1088 of the Civil Code which provides that any suretyship shall terminate by the cession of the contract or if the oblige discharges his suretyship or the principal obligor from the debt.

49. In general business transactions, parties agree to enter into various agreements, once they do, they are naturally bound by the agreed terms and conditions. Having said that, certain occasion may arise which may require the agreements to be amended to reflect their change of circumstances. As such, an amendment to the original agreement may be the best solution for the parties. Any amendment made to the original contract does not necessarily replace the initial agreement. In most cases, the amendment would only substitute part of the agreement to simply reflect the parties’ intended change of circumstances. An amended contract can be as important as the contract itself, and in the context of this case an amended contract has been appropriately executed and should be treated as part of the contract.

50. As to the Defendant’s argument that the amendment operates as a replacement of the LSA, one must look at the wording of the agreement to analyse the parties’ intention behind such amendment. The ALSA reads as follows.

51. In my judgment, the wording of the amendment does not replace the original contract, just the part that requires the change as a result of Second Party failure to pay its debts, " replace the unit number 204 of One at palm Jumeirah’s project with the unit number 1005 from the same project and registered the same under KRT IV LIMITED”. The changes to the original agreement LSA are not extensive, it must not be interpreted as the parties intended to draw up a new contract entirely.

52. As to the second argument that the oblige who have entered in to the ALSA has discharged should his suretyship or the principal obligor from the debt with reference to Articles 1088 and 1099 of the Civil Code which reads as follows:

53. As it has been set out above, while dealing with interpretation of the ASLA, the wording shall not amount to repeal or replace the original contract, just amended the Second party one obligation as it just required him to change the Number of the Unit that yet have to be paid for by the Second party.

54. The ASLA did not deal with the liability of the guarantor, therefore it did not change nor replace or discharged. The amendment remains part of the original contract which must survive with all terms and conditions and both LSA and ALSA must be read as one Agreement.

55. There is no mention in the ASLA or in the evidence to suggest that the creditor received any satisfaction of his debt or by accepting another thing to discharge the debtor or guarantor from his obligation. The amendment in my judgment cannot go beyond the clear and explicit wording it contains.

56. Furthermore, the guarantor’s obligation as I have concluded earlier is plainly to guarantee the payment of the cheques and has nothing to do with the delivery of the unit, in my view even if the Defendant’s argument is to be taken at the highest, in theory, and that the creditor obligation toward the delivery of the Unit can fall under “accepting other thing”, the guarantor is still bond by his obligation to guarantee the bounced cheques payment that not yet been paid, replaced or distinguished.

57. The same can be said in relation to Article 1099, the amendment does not amount to replace or repeal the original contract therefore the Guarantee clause must survive.

Limitation

58. Under this ground for the Immediate Judgment Application, the Defendant states that the Claim is any event barred under the Article 1092 of the Civil code “if a debt is due, the creditor must claim for it within six months from the date on which it fell due, otherwise the surety shall be deemed to have been discharged.” On the other hand, the Claimant is of the view that suretyship ought to be construed as commercial act due to its direct connection to the credit agreement, commercial papers and act of trader and therefore must be governed by the commercial law which extends the limitation to 5 years.

59. The Claimant refers in particular to many articles in the Commercial Transaction law to demonstrate the idea that the Defendant obligation being Grantor to the Company Town Squier is a commercial act therefore limitation extended to 5 years instead of 6 Six months as outlined by Article 1092 of the Civil Code.

60. The relevant Article from the Commercial Transaction Law referred to by the Claimant in his written and oral submission are as follows:

61. As the Claimant rightly submitted that the LSA and ALSA involve commercial papers “cheques” and one company at least being in the transaction would fall within the definition of commercial transaction, based on that conclusion, the limitation period for the purposes of this is in total of five years and the Defendant’s argument must be dismissed. The LSA concluded between Town Square, Invest Bank and Khaldoun Tabari is an act of commence as considered under Article 5 of the Commercial Code, the commercial nature of the general relationship between the parties in this Claim so obviously commercial in nature. This commercial act is expressed in the LSA and ALSA later. Accordingly, the application of the Commercial Code to the settlement means that the 6 months limitation period is irrelevant and does not apply in these circumstances.

Security for costs

62. Turning to the Defendant’s second application, namely its request for security for cost order against the Claimant (the “Security for Costs Application”) which was only required to be considered by the Court had the Defendant failed to successfully establish any grounds for its Immediate Judgment Application. Considering the dismissal of the Defendant’s Immediate Judgment Application, on the basis that the Claimant has locus standi to bring its Claim against the Defendant. I will then move on to consider the legal basis of the Security for Costs Application pursuant to RDC 25.100 and will set out the parties’ short submission on the relevant application.

63. The Defendant submits that the grounds for the Security for Costs Application are twofold. First, the Claimant is a nominal Claimant to these proceedings, having not been a party to the LSA or the ALSA, nor has it loaned any monies to the Town Square. The real claimant is Mr Tabai, who has fled the jurisdiction so far as the Defendant is concerned, has not returned to the UAE despite the issue of an Interpol red notice against him. Secondly, the Defendant says that there is reason to believe that the Claimant will be unable to pay the Defendant’s costs if ordered to do so. The Defendant relies on the Claimant’s own management account of 31 December 2021 which plainly shows that the Claimant is balance sheet insolvent with total liabilities of AED 28,010,121 being less than its assets of AED 266,034,346. The second documentation evidence which the Defendant relies on in support of its contention is the fact that the Claimant has been unwilling to provide more recent management accounts, audited account or provide answers regarding its financial position.

64. Further, the Defendant invites the Court to order the Claimant to pay the costs of and occasioned by the Application and the proceedings on an indemnity basis, inter alia, because, the Claim has from the outset been an abuse of process, the Claimant has repeatedly changed its position in these proceedings on key issues, for example, in relation to the applicable law and whether to grant security for costs, which in turn compelled the Defendant to incur significant costs and unnecessary costs in arguing that the UAE law is applicable to the dispute which is now been abandoned by the Claimant.

65. The Defendant takes an issue with the Claimant’s resistance of its Security for Costs Application, stating that Vision Investment previously conceded that it would be willing to pay security and this position has bizarrely changed without any sensible explanation.

66. In response, the Claimant’s submissions on the Security for Costs Application were quite brief. The Claimant submits that by virtue of RDC 25.107 the Defendant was required to make its Security for Costs Application no later than the case management conference hearing, considering this has been concluded, the Defendant’s application ought to be dismissed.

67. Further, the Claimant takes an issue with the Defendant’s allegation relating to the lack of its physical presence in the UAE arguing that such assertion does not suggest the Claimant’s inability to pay the Defendant’s costs should the Court find in its favour on the overall dispute. It goes on to say that the Claimant has not taken any steps to move or transfer their assets or make it out of reach which would make it difficult for the Defendant to enforce a money judgment. Therefore, considering the fact that the Defendant has failed to satisfy any of the conditions set out under RDC 25.102, its Security for Costs Application should be dismissed.

Discussion and analysis

68. I will briefly set out the prescribed requirements by virtue of DIFC Rules before addressing the parties’ submissions on this Security for Costs Application.

69. Under RDC 25.97 which clearly states that “a defendant to any claim may apply under this Section of this Part for security for his costs of the proceedings”, RDC 25.100 provides, “where the Court makes an order for security for costs, it will determine the amount of security; and direct the manner in which and the time within which the security must be given”. Further, RDC 25.101 provides that the “Court may make an order for security for costs under RDC 25.100 if it is satisfied, having regard to all the circumstance of the case it is just to make such an order and one or more of the conditions in Rule 25.102 applies”.

70. Thus, in this Security for Costs Application, three questions arise, (a) is one or more of the conditions in RDC 25.102 satisfied? (b) if so, it is just in all circumstances of the case to order security (c) if so, in what form, what amount and by when should security be provided.

The first question – conditions satisfied?

71. The Defendant appears to rely on RDC 25.102(2) being “the claimant is a company or other body (whether incorporated inside or outside the DIFC) and there is reasons to believe that it will be unable to pay the defendant’s costs if ordered to do so”. The commentary in the White Book (2023) on the equivalent English rule says: “In order to establish ground (c) the application must show “there is reason to believe that it [i.e. the claimant company] will be unable to pay the defendant’s costs if ordered to so”. The opening words “there is reason to believe” have the effect of watering down the obligation which follows, i.e., the obligation to prove the company’s inability to pay costs if ordered to do so. The defendant does not have to show on a balance of probabilities that the claimant company “will be unable to pay”.

72. The purpose of an order for security for costs is to protect a defendant against the risk that it will successfully defend the action however be unable to enforce a costs order in its favour against the claimant or face extra burden in doing so – for example the claimant is based in a jurisdiction that may not readily enforce a DIFC Courts judgement.

73. As far as the evidence is concerned, I am persuaded that this condition is satisfied. There is a possibility and sufficient grounds to believe that the Claimant would be unable to pay the Defendant’s costs if the Court were to rule in its favour on the issue of liability and quantum and grant it a money judgment. In support of this analysis, I rely on the Claimant’s 2021 management account statements in addition to the Claimant’s reluctance to provide any clarification or recent financial statements to the Defendant demonstrating its solvency. In the absence of any clear evidence, one would assume that the Claimant does not have any material assets which could be used to satisfy a potential money order in favour of the Defendant.

74. It is also a significant point that the Claimant had provided no evidence of its current financial position, therefore the Court is not confident that it would meet any order for costs made against it. Whilst the Claimant provided an outdated account management statement illustrating their liabilities and assets of 2021, that data is not the complete answer to the application given the risk the Defendant would have to face enforcing any money judgment against the Claimant’s assets, if any at that point. It should be noted that it is wholly appropriate for the Court to make a presumption against the Claimant that does not disclose its assets when there is no publicly available evidence as to its solvency. Further, where there is a real risk of non-enforcement or of any additional burdens in the way of enforcement, security will ordinarily be ordered.

75. Given the fact that there is a very good reason to believe that the Claimant would be unable to pay an adverse costs order, I am satisfied to conclude that the condition in RDC 25.102(2) is met.

The second question – is it just in all circumstances of the case to order security.

76. In the circumstances of this case, that is the only just result. The English Courts have held that, once it is established that there is reason to believe a claimant company will be unable to pay a cost order, as it is the case here, it will ordinarily be just to order security, unless the claimant can show security would stifle the claim, I rely on the authority of Tulip Trading v Bitcoin Association for– [SV] [2022] EWHC2, [52] –[53].

77. There is no suggestion that requiring the Claimant to pay security for the Defendant’s costs would stifle its Claim. The Claimant does not assert or suggest that it would be unable to comply with an order for security, the Claimant could make his funds available to the Defendant. Thereby, the Claimant will not suffer any material prejudice because the Claimant can afford to provide the security.

The third question - form, amount and timing of security

78. The security should be provided in the form of cash paid into the DIFC Court. The Court can hold the funds pending the determination of the Claim. That is the usual approach in which security is provided. The Claimant is required to provide security within 60 days from the date of this Order, this affords the Claimant a reasonable period to arrange for the security to be provided for the Defendant.

79. The Defendant seeks a total amount of USD 322,662 which was described as a “modest amount” considering the scope of this dispute. I am not satisfied that this is a reasonable or a modest amount and this should not be used as an instrument of oppression so as to stifle a serious and a genuine claim, however the Court does expect the Claimant to raise money from other sources to provide the security. As such, an amount of USD 100,000 should be paid to the Court.